Crypto and Tax

sjh101

Hi. Can anyone involved in Crypto explain to me how CG Tax would work for someone living in the UK? Is it dependant on current salary? 
I've seen somewhere online that CGT is 30% when involved in crypto? 

I'm confused as to how much i would be entitled to pay from crypto  if salary needs to be taken into consideration. I.e if my salary was approx £21,000 gross and I had made around £10,000 from crypto, what CGT would I be expected to pay? 
Thanks 

kuratowski

https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets
If you have no other gains in the year, then a gain of £10000 would be covered by the CGT annual exemption (note this is different from the income tax personal allowance).

vinnieb

Might it depend too how you got that crypto? I've only had a quick look but seems if you mined it that could count as income. And not sure if mining costs can be offset.

Jeremy535897

Full details at https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto20000

Local_Person

Worth noting that if you make any bad trades/sell at a loss, I believe you can take that off any CGT bill you might have? Most exchanges have a full breakdown of all your trades which you can export if you need proof for your records.

Fair play if you've made 10k profit btw, I dream of being rich enough to have to deal with CGT forms one day haha!

pphillips

Local_Person said:

Worth noting that if you make any bad trades/sell at a loss, I believe you can take that off any CGT bill you might have? Most exchanges have a full breakdown of all your trades which you can export if you need proof for your records.

Fair play if you've made 10k profit btw, I dream of being rich enough to have to deal with CGT forms one day haha!

You still needs to declare capital gains even if you only make £1 or lose £1 from crypto trading.

Jeremy535897

pphillips said:

Local_Person said:

Worth noting that if you make any bad trades/sell at a loss, I believe you can take that off any CGT bill you might have? Most exchanges have a full breakdown of all your trades which you can export if you need proof for your records.

Fair play if you've made 10k profit btw, I dream of being rich enough to have to deal with CGT forms one day haha!

You still needs to declare capital gains even if you only make £1 or lose £1 from crypto trading.

You only need to declare capital gains if the capital gain exceeds the annual exemption of £12,300, or proceeds exceed £49,200. See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/974133/SA108_English_Notes_2021.pdf

foxy-stoat

Jeremy is correct, if you make a profit of less than £12,300 in any one tax year you do not need to do anything and wont pay any tax - correct at the time of writing.  Making a profit = a tax event - you need to know what a tax event is though, its not drawing money out into your bank account.

Do keep up with the HMRC guidance though, incase this changes in the future.  I researched this and looks like the tax rate and tax free allowance wont change for 5 years, but do your own research or pay an accountant.

If your married you can transfer £12,300 worth of profit to your wife tax free, but how I read the guidance you may need to declare this transfer to her wallet/exchange wallet.  

My example;
I bought 100,000 Doge @ $0.005 at the start of the year for $500 (£350 ish). 
I have transferred 17,500 Doge to her and will sell if/when it hits or gets near to $1, it got to $0.71 a few weeks ago.
Her tax event will be selling 17,500 Doge for $17,500 (£12,250) with an initial value of $87.50 (£61.25), what I bought it at not the value when I transferred it, which is $0.31 at the moment, assuming it hits $1 before the next tax year.
May sell for sell before April 2022 if its close enough, but will transfer more coins just before.
I will sell the same amount.
Repeat each year for tax free profits.

Selling or swapping coins for others or transferring from wallet to wallet is a tax event, unless its your own wallets, in which case you need to declare this.  Once the HMRC have your wallet addresses they can see all transactions on the blockchain very easily.

From what I have researched, I need to declare my sale and transfer to Wife to HMRC, no tax to pay for me.  Not sure if she needs to declare it or not, I may get her to anyway just incase, but she wont have to pay tax either.
Max out pension contributions each and use the profit in lieu of missing income from salaries, is the plan for Doge.  Have others that may end up making 6 figure profits, in that case I will be paying a fair amount of tax as reducing mortgage is the next step.

I know that HMRC write to Coinbase a couple of years ago and requested all UK customers names and addresses for balances of £5,000 or more.  In light of what is happening in the Crypto world and media coverage, normal folk coming into many thousands or 10's of thousands of profits, governments will enforce their tax laws and dish out heavy fines if found out and avoiding paying tax.

As the blockchain is public and every transaction could be tracked to hot or cold wallets on or off exchanges, its not worth not declaring it if you do actually what to drop £100,000 on a lambo. 

If your just planning on creating a tax event for £12,300 or less a year you can do, pay no tax, do not have to fill in one form.

tasticz

Salary: £25k
Rental Income: £22K (gross)

Profit from crypto: £5k

Is the profit from crypto still tax free in this case?

pbartlett

salary and rental are income and thus separate for tax purposes from crypto which is a capital gain. 

You are allowed 12300 pa of capital gain tax free.

topbuzz

UK tax on crypto is confusing - HMRC have based the rules on stocks & shares.
There is a difference between 'investing' and 'trading' that you also need to consider.

In own name/sole-trader (self assessment):-
buying/holding coin = no tax
moving from wallet to wallet = no tax
mining/staking = income tax (20/40/45%) + NIC
buying & selling (trading) = CGT (10/20%)

In Ltd co:-
buying/holding coin = no tax
moving from wallet to wallet = no tax
mining/staking = Corp Tax @ 19%
buying & selling (trading) = Corp Tax @ 19%
Salary/Wages/Payroll = income tax (20/40/45%) + NIC or extract cash with dividends @ 7.5% up to high tax rate band.

Everyone gets £12,300pa (2021/22) CGT tax free allowance. So if you make a gain below that you don't have to declare it to HMRC. So in one calendar year, if you cash out before and after 5/6 Apr you can cash in £24,600 tax free. Even better, if you're married, you can gift your wife £12,300 worth of coin tax free, get them to cash it in using their CGT allowance, and again do it before/after the 5/6 Apr and combined you both can cash in £49,200 cash free per calendar year.

It is advised to take a good log off all transactions. There are cloud based tools which can do this for you. Depending on the amount of transaction done in a year this can be free. eg https://koinly.io/ is a good example. Most are geared up for US tax laws so its difficult to find one that truly understands UK tax.

Plus in the near future the UK gov are looking at increasing CGT so its inline with income tax bands.....and they want to increase Corp Tax too. So all taxes could be going up - so make hay now!